Inherit a $500M+ AUM practice? Or give it all up for a Fintech dream?

Hey guys,

In a nutshell, this is my dilemma, I'm on a road to what I've unfortunately grown to see as a golden cage and I'm not sure if it's what I really want out of my career and life. For background, I'm a twenty-something working at a wealth management practice on the west coast. Over the last few decades, my dad has worked very hard to establish a $500M+ AUM practice that generates a few million a year in revenue. For as long as I can remember, he has wanted me to go into business with him and eventually take over the practice. The plan was simple. I finish up school with a high GPA and the right resume, get experience elsewhere, join the team, learn the ropes, expand and modernize our practice, and eventually take the reins. Well, we're about half of the way through that process, and on the surface, it's smooth sailing so far. But for some reason, I don't enjoy it as much as I should and I know deep down that I could do something with more impact by going out on my own in the fintech space.

To be honest, for as long as I could remember, I wasn't really that interested in taking over our practice. I know how arrogant this might sound and I'm aware that this is an opportunity many people would kill for,  but I just never fell in love with the industry. It's a bit antiquated and is basically relationship management at the end of the day. If you spend your time conducting investment research on new technologies or trying to create alpha in portfolios,  you won't make a 1$ more, the name of the game is bringing in clients, advising them, and keeping them happy. Yes, it's a great gig financially and you get to help lots of people, but it is not that intellectually stimulating and lacks creativity. I'm a lot more interested in solving hard problems, working on the creation of new financial technologies, and delivering optimized products and services for people.

Tech is ultimately driving the future of financial services. Finance is highly regulated with a complex infrastructure so the burn has been slow. But the opportunity for big startups is now. As a parallel: It used to be really hard to start a software company. Today, almost anybody can start one with a credit card and a laptop. Why? Amazon Web Services made infrastructure as a service mainstream. The same trend is happening now in Fintech, via Plaid, Stripe, etc. The infrastructure exists now, and thousands of problems are waiting to be solved. I may be biased because I believe most of the world's problems can be solved by technical innovation but I think that If you're not embracing and building on emerging technologies you're bringing a knife to a gunfight. 

Yes, our business is doing great now, but say the industry standard on fees goes down 50% in ten years from now, what will I do then? Do I really want my only leverage to be my relationships, constantly focused on growing aum? Of course not, I want to be immersed in emerging technology and have raw skills that are not easily replicated so that I'm always valuable and have the ability to pivot anytime it's necessary, I want my resume to speak for itself. It'd be nice to have a skillset with real exit opportunities long term.

The problem here is it appears there's no real exit from this in the future if I stick with this path; I'm basically giving up any real chance of any other career. Now I'm young and still have a chance to do something crazy, but once I get a little older, get married, have kids, etc. There's no chance I'll be able to try something new, I'll be too accustomed to the lifestyle financially by then. 

However, this is obviously a two-sided coin. If I leave and start over, what other real path do I have toward making 7 figures annually, pretty much none. Once I leave, I become a regular scrapper again, competing with everyone else for my rightful place in the world. I give up a sure thing for a chance at something more fun. It could be the worst decision I'd make in my life or the best. Hard to say...

 The three real options I see:

1) Shut the hell up, and appreciate the opportunity I've been given, focus on growing the practice, hope for the best, innovate internally. 

2) Take a swing at my own startup, I'm confident I can raise a friends and family seed round. Difficult, not impossible.  

3) Attend an M7 Mba program, take the time to "marinate" in a stimulating environment, learn more about the problems worth solving, and start fresh within Fintech afterward. 


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Comments (14)

Jun 17, 2021 - 11:52pm

Why does it seem like every type of transaction has to have a fintech startup built around it nowadays?  I know a lot of about tech, but not really fintech, but I am not really that bullish about it.  But if you have a good idea, it won't hurt to spend a year trying.  You don't have to give up on your dreams for it

Jun 17, 2021 - 11:53pm

Why can't you take over the practice and work on your passion on the side? That way if it becomes promising you can take your time finding the right replacement and make your departure.

If it's your father you're worried about, I'm sure he'd respect that you're trying to carve out your own lane.

  • 2
Jun 18, 2021 - 12:04am

Can you come up with a FinTech product to develop internally and solve problems your Father's clients face? A new technology arm of the firm developing products you're passionate about while the main business drives revenue to support your ventures?

Interested in code, market mechanics, and trading strategies!
  • 1
Jun 18, 2021 - 5:22pm

Good idea. I've thought about it but it wouldn't work. it's really got to be one or the other. 

But to your point, the problems I'm working on solving are based on my own experiences in the finance world so we're on the same page. 

  • Associate 1 in CorpDev
Jun 19, 2021 - 1:00pm

Not true dude. There are so many problems to solve in wealth management. Developing a solution or an adjacent product in-house and scaling it is a real opportunity. You use fairly steady cashflow from your business to develop a new business line. This strategy has been used by so many investment firms and growing companies. You are being completely near sighted and stubborn by ignoring this possibility.

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Most Helpful
Jun 18, 2021 - 6:50am

You've essentially answered your own question. If you don't like the world of wealth mgmt, including owning / running the firm (which in and of itself brings on more interesting opportunities as you choose how to grow the business), you don't like it. If you don't like it, all it offers you is money. At some point, that will not provide motivation as you'll achieve "enough" very early in your career and the mother ship wills tart to slide. If you were actually interested in PWM, you're golden, but you're not.

Lots of kids aren't interested in the family business. They need to go out on their own and find what rocks their world. Remove PWM from the equation. What if your dad had a hugely successful dental practice? He assumed and wanted you to take it over some day. Would you go to dental school? What if he owned an auto dealership? Would you get into the car business?

Some will automatically track to that. Others want nothing to do with that world. Nice to have choices. You're not crazy if you opt out as you'll only have long term success if you enjoy the business. Especially if you don't have to build it.

Full disclosure: I have a successful business that my son could enter any time. We've talked about it. He's starting in the same industry but in the corporate environment. I think he'll be better suited at that for now (great training, part of a big team, etc - good transition from college to the working world). If he wanted to, he could walk into a world that would  set him up probably for life without all the stresses of building a career. But I don't think it's what he wants to do, at least not now.

You do you!

Jun 18, 2021 - 5:14pm

Agreed for the most part, but what about playing the hand you're dealt to the fullest.

I could theoretically just suck it up and work really hard to reach a certain level of success within this business, and then make a shift into tech a later on in my career. Potentially succeeding in one area first and moving from a position of strength (capital, experience) later on, rather than jumping in from a position of weakness (limited track record, limited capital) now. Isn't it wrong not to see something all the way through before you move on? I'm fundamentally opposed to the idea of quitting something halfway through, it goes against everything I stand for.

Jun 19, 2021 - 8:50am

There are no wrong or right answers to your situation. Totally subjective and dependent upon you. All I can tell you is humans will naturally do what they like without a lot of angst. Contrary to that, that is much friction when you try to just gut it out, and for most it's not sustainable. Sure you can do it but if you don't like it, you'll never make it what it could have been and you'll have lost all that time while being unhappy.

It's really about what you want, nobody else. You need to think hard about that. Nothing wrong with setting yourself up financially, but just be honest with yourself. Also, if you're not going to take over the practice or stay with it long term, in fairness to your dad you should discuss a succession plan with an outside party so he can sell from a position of strength.

Jun 19, 2021 - 2:59pm

Run it for a year or two to build up some cash. Bring in other advisors who want to be partners and give them/sell them some equity. Retain a small piece of the equity for continued income. Go do your tech thing.

I'd find a way to retain some equity and let others run it. Play a small part and if it makes sense, use the business to test whatever you plan to build.

Jun 19, 2021 - 11:46pm

How do you know you will have probabilities on your side if you run a Fintech or Tech startup, or take some other route? Just try to think about this in probabilistic terms. Sure, Wealth Management is not the most tech-savvy business. But if your entire fee structure is protected only by your relationships with the client, you are in the soup already. You have to offer a differentiated service, consistently, and take care of the relationship. Estate & trust planning, portfolio management, tax planning, private investments - add more feathers to your practice. And you will see, this can be a good ship to command, even in the long run. Most UHNI clients would not be interested in talking to a robo advisor if that is one of the fears broiling in your head. So, as far as your practice delivers value, you should be fine. This is a business where the legwork is usually correlated with the success you will have. And the legwork is already done here.

Think about the counterfactual on the Fintech front. What industry/problem are you focusing on? Unless you have a very specific idea with a very specific solution, there is a chance you are thinking in terms of trending keywords. Sure, there are a ton of startups in the space that are finally doing well. But, going against the tide takes some time, and most probably doesn't end up in a rosy place. 

From what I see - you have access to better resources. And, somewhere deep inside, you want to have something you can call your own. You can suffice that need by running the family business. Stick to the plan. Let it compound. 

I wanted to do this with the math - $500m in AUM, should be hailing in $3m or so in revenues. Operating income after most major expenses would be shy of $500k, if I am not wrong? Unless you have partners who have a share in this, this is a solid start. 

Last thought - think about it in terms of exit opportunities. The path of least resistance would be the one where you end up with more optionality, which in your case will come with the degree of resources you accumulate by the time you exit this business. Sure, you might get a major exit from a Fintech/Tech startup or a target school MBA and the subsequent grind. But those birds are not even in the bush. They are in your head. Grab the one in your hand and see what you can do about it.

As always - feel free to discard everything suggested here. Cheers, mate!

Jun 20, 2021 - 12:46pm

Take the WM firm, use the cash it generates to do some angel investing in fin tech to start building contacts and a reputation. (At least locally) After some years you can decide if you want out of WM, sell the company and go pursue your dreams with some cash in the bank and a head start.

Jun 22, 2021 - 5:33am

I'm actually in a pretty similar situation except my father really doesn't pressure me much about it, he told me I have the opportunity with his business but I can do whatever. I'd have to purchase the book of business from him anyway if I wanted that route which would be a hefty loan but regardless, I have entrepreneurial visions myself. I just want to create and build something, it's really all I've wanted to do. There needs to be more emphasis on the path that'll create the most sense of fulfillment.

  • Intern in PE - Other
Jun 22, 2021 - 10:20pm

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